In the most recent US Presidential debate that took place at Hofstra University in New York, energy policy took centre stage. The incumbent Obama, whilst recognising the strategic importance of the fossil fuel industry to the US in terms of jobs and energy security, also stressed the need of not “ignoring the other half of the equation” which includes developing renewable energy sources and improving energy efficiency. The pretender Romney on the other hand focused most of his time on the subject talking about Mr. Oil, Mr. Gas and Mr. Coal and criticising the President for not doing enough during his time in office to support these industries.
During the course of the Presidential campaign stark differences have emerged between the pair over their respective energy policy priorities. Whilst both remain supportive of the fossil fuel industry, President Obama has also thrown his backing behind the renewable energy sector. Romney on the other hand, although claiming to believe in the country’s renewable capabilities, is not willing it seems to extend this to include providing critical financial support to enable the sector to develop.
According to Romney’s spokesman for his Iowa campaign, “he will allow the wind credit to expire, end the stimulus boondoggles, and create a level playing field on which all sources of energy can compete on their merits.” This position has put him at loggerheads with some of his own party members who see the production tax credit as central to economic development and job creation in State’s such as Iowa.
What Romney neglects to mention is that to create a level playing field requires also addressing the subsidies that currently go towards the fossil fuel industry in the US. These subsidies have been estimated by the OECD to amount to $15 billion in 2010, considerably more than the $1.5 billion per annum that the production tax credit is estimated to cost.
Recent research has also shown that renewable energy subsidies are not excessive when compared to the historical trajectory for emerging energy technologies. For instance, as a percentage of inflation-adjusted federal spending, nuclear subsidies accounted for more than 1% of the federal budget over their first 15 years, and oil and gas subsidies made up 0.5% of the total budget, while renewables have constituted only about a tenth of a percent1. Maybe Romney does indeed need to address the other half of the equation?
(1) Pfund, Nancy and Healey, Ben (2011). ‘What Would Jefferson Do? – The Historical Role of Federal Subsidies in Shaping America’s Energy Future.’
Posted: October 19, 2012